INSUBCONTINENT EXCLUSIVE:
The domestic equity market remained resilient for much of last week in spite of weak GDP numbers and other negative macro indicators, but
inflation worries came in to dominate the narrative and trigger bear hammering of stocks by the end of the week.
In fact, RBI’s status quo
on policy rates acted as a mood spoiler: an interest rate cut was what was needed to kickstart the economic engine, but RBI threw the ball
back into the government’s court, which sparked off selling pressure in the market.
The Union Budget of 2020 is now going to be the next
major turning point for the market, as far as domestic factors are concerned, but till then global factors will keep investors on their toes
One good thing is that liquidity flows have remained strong, which will prevent the market from correcting heavily in terms of price, but
time-wise correction will continue till the beginning of next year.
November auto sales numbers showed slight improvement compared with that
in the previous month but were lower on a YoY basis
A pickup demand was not visible in the November auto numbers
A spike in CPI, caused mainly by supply constraints, will act as a hurdle to quicker economic growth
The sooner the CPI numbers cool down, the better it will be for economic recovery.
Event of the weekInvestors were taken aback by RBI’s
decision to pause its rate cutting spree
In the past, RBI had cut interest rates for five consecutive times and this could have been the sixth, but it did not come about.
This
indicates that there is little room for monetary easing after a full year of rate cuts
Going forward, RBI would go into a wait-and-watch mode to see how things pan out in the economy.
Technical outlookNifty50 has changed from
an upward bias to a corrective stance
A ‘double top’ stands confirmed and it will make the market correct either timewise or pricewise, or both
Generally, such corrections take lot of time to materialise
The momentum indicators have already weakened and it is visible in price action
Traders are advised to book profit on long positional trades and initiate shorts on rallies, keeping the weekly highs as stop
losses.
Expectations for the weekThe market is expected to remain volatile in the coming weeks, as global as well as stock-specific factors
will influence the proceedings at the stock exchanges
The outcome of the US Fed meeting and further progress in Donald Trump’s impeachment process will be major international events, while
listing of Ujjivan Small Finance Bank IPO and fundraising by YES Bank will be some of domestic events traders and investors will can keep an
Investors can look at selective pockets where there is an opportunity to accumulate stocks, as they are now available at decent valuations
Metals, refining and beaten-down infrastructure stocks are throwing up good opportunities.
Nifty closed the week 0.80 per cent lower at
